After experiencing the new equilibrium inflation rate and its effect on their real wage, workers realize that the equilibrium inflation rate has changed, and their real wage has changed. Suppose that they change their expected inflation rate and accept to lower the growth rate of nominal wage by the same amount as the change in the equilibrium inflation rate. What motivates the workers to accept this change in their expected inflation rate?
After experiencing the new equilibrium inflation rate and its effect on their real wage, workers realize that the equilibrium inflation rate has changed, and their real wage has changed. Suppose that they change their expected inflation rate and accept to lower the growth rate of nominal wage by the same amount as the change in the equilibrium inflation rate. What motivates the workers to accept this change in their expected inflation rate?
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter14: Money And The Economy
Section: Chapter Questions
Problem 12QP
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After experiencing the new equilibrium inflation rate and its effect on their real wage, workers realize that the equilibrium inflation rate has changed, and their real wage has changed. Suppose that they change their expected inflation rate and accept to lower the growth rate of nominal wage by the same amount as the change in the equilibrium inflation rate.
What motivates the workers to accept this change in their expected inflation rate?
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